August 14, 2000

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Business/IT:
A Matter Of Proportion

We always have much to learn from what has come before us

By Bob Evans

ho was it--Winston Churchill?--who said, "I didn't have time to write a one-page letter, so I wrote you a five-page letter"? By the way, a couple of weeks ago, PBS aired a two-part series on the Battle of Britain called The Finest Hour, in which Churchill features prominently, and I wanted to say that in these heady times in the turbulent world of business and technology--where markets are rocked regularly and vast fortunes are made and wiped out with swiftness, and as we sometimes tend to let ourselves think that these "battles" we're waging in the theater of commerce are so profound and unprecedented--it's probably a very good thing to look back and gain some perspective from what has come before this and what type of events rate as truly important or profound.

I say this in no way to diminish what's currently happening in American and global business, nor to undermine the extraordinary roles all of you 400,000 readers of this magazine have played in that achievement. Rather, my point is that for however far we have come as individuals or companies or even nations, we always have much to learn and much by which to be humbled by revisiting what has come before us. And in that context, I give the highest possible recommendation to the heart-jolting The Finest Hour, available from PBS at 800-752-9727. It's a story of how ordinary people, thrust into utterly extraordinary circumstances, find within themselves--and particularly within their leaders--the selflessness, courage, conviction, and genius to overcome almost unfathomable challenges.

So, Churchill and his five-page letter... well, I think there's an urban myth that a very well-known and elite U.S.-based consulting firm has a tiered pricing system for the reports it delivers to clients during or after an engagement, and the myth goes something like this: For a 100-page report, the price is $10,000; for a 50-page report, it's $25,000; and for a 10-pager, it's $100,000. Philosophical and pricing-strategy ties to Churchill notwithstanding, that anecdote typifies the sometimes-inscrutable approach to customers, value, and fees that many consulting companies have these days.

For example, take a look at the thinking that many consulting companies use in engagements with businesses striving to establish aggressive, customer-focused IT plans and capabilities.

While the customer probably wants to retain a consulting firm that can help not only with determining an overarching business strategy but also deliver all of the technology development and implementation, the consultants can take quite a different stance. From their perspective, strategy planning and development is delivering margins in the range of 60% or so, and in addition is great cocktail-party conversation (really, now, who wouldn't want to be a strategic management consultant?).

On the flip side, though, the gritty and roll-up-the-sleeves world of actually building the technology systems that make all that strategic thinking come out of the clouds and into the real world is, according to the finance department's figures, generating only 22% profit margins. Clearly, that sort of lousy performance can't be tolerated in an outfit where the smart guys on the strategic side are keeping more than 60 cents from every dollar they bring in, so the only recourse is for the consulting firm to start moving away from the seemingly unglamorous world of doing the heavy lifting of selecting, connecting, installing, testing, and optimizing the IT systems. That's how to keep profit margins north of 60%, right?

That sort of approach might work for a small number of blue-blood consultants that have proven their worth over the years, but for most others--including some of the new breed spawned in the last few years of the Web craze--it's a classic example of ignoring what works for the customers. Those customers don't really give a hoot about the comparative profit margins of the consultant's internal divisions, but they care a helluva lot about getting their overall strategy and systems project done rapidly, on time and on budget.

It might be the sort of issue that a 10-page report could cover. And a five-pager might be even better.

BOB EVANS
Editor-in-Chief
bevans@cmp.com

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